AXIS AUTO FINANCE OVERVIEW2020
HIGHLIGHTS
Note: All dollar amounts in CAD | fiscal year end is June 30
TSX-V: AXIS is a technology-driven specialty lender
extending used vehicle loans to borrowers with credit scores
in the non-prime range
AXIS originates loans indirectly through a coast-to-coast
network of 1,200+ automotive dealers
AXIS loans give our clients much needed access to a vehicle
and support credit rebuilding
Best in the industry management team led by Todd Hudson,
the founder of Element Financial
Axis is the only Canadian lender covering the entire non-
prime credit spectrum
Significant capital available to fund growth via its $100 MM
senior debt line and securitization facilities
Recently announced a strategic partnership with US giant
Westlake Financial, largest privately-held non-bank
automotive finance company in the U.S.
Operating Geography
Loan Book PresenceCorporate Office
Western Canada
Ontario and Maritimes
Quebec
$15 MM
$127 MM
$15 MM $127 MM
FY2016 Q3 FY2020
Finance Assets
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MANAGEMENT TEAM
Ilja TroitschanskiTodd Hudson Richard Lloyd Steven KosterChief Executive Officer Founder and President Chief Financial Officer Managing Director
25 years of sales and operations management experience in
Canadian alternative lending
Proven track record of excellence growing companies organically
and having overseen and integrated 14 acquisitions
A successful entrepreneur with a wealth of business development experience
Has built Axis consistently delivering best portfolio metrics in the industry
Former Director of Operations & Finance at
Travelers (acquired by Scotiabank)
20 year career in the automotive finance industry
Former SVP Finance at CIT Canada/Newcourt Credit –annual originations of US$
1.2B
Former General Manager at TD Equipment Finance
Best-in-class management team of industry veterans is leading Axis on to the next stage of growth
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THE MARKET
$40 BillionCanadian Used Car
Market
A vehicle is a necessity, with
3 million used cars sold annually in Canada
~30% of Canadians do not
qualify for traditional financing
sources
Canadian Non-prime used
vehicle financing industry
30%Addressable Consumer
Base
$8 Billion Industry
There are >8,000 auto dealers in CanadaAxis is currently servicing ~1,200
The massive Canadian used car market has realized significant growth over the past decade
Source: Desrosiers
$29 $28$30
$32$35 $36 $36 $35
$37$39 $38
$41$43 $45 $46
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E
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Client Credit
Quality A B C D
Lenders
Servicing Market
Segment
THE COMPETITION
AXIS OFFERING OF FULL SPECTRUM B TO D-CREDIT IS UNIQUE TO THE MARKETPLACE
A and B credit markets are dominated by the banks
The D credit market is highly fragmented with no dominant players
The opportunity for rapid expansion exists through offering a full non - prime spectrum credit program to dealers
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LendCare
OUR CUSTOMERSAverage Customer Demographic
Average Contract
37 years oldIncome of ~$3,900/monthCredit score between 450-600
7 years oldBeginning balance of ~$14,000 Monthly payments of ~$400Average term of 48 months
14%
4% 4% 5%
10% 12%
24%
21%
4%
No Score < 549 550 - 599 600 - 649 650 - 699 700 - 749 750 - 799 800 - 849 850 +
Canadian Credit Market Average Vehicle Depreciation
Source: Equifax, retireby40.com
~30% of Borrowers are non-prime
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OUR UNDERWRITING TRACK RECORD
Source: Equifax, Company disclosures
Note: dates are presented in calendar format
• In-house developed predictive risk indicators power better-than-market performance
• Asset Control (GPS) devices utilized to mitigate risk
• Rigorous Credit Policy reviews allow quick changes where necessary
• Newest Fraud Detection tools (Citadel) utilized in underwriting
Delinquencies – Axis vs. Market
12.0% 12.0% 12.1% 12.1% 12.2% 12.4% 12.5% 12.6% 12.2% 11.6%
13.0%
4.1% 3.5%
4.7% 4.1%
3.0%
5.4%
7.1% 7.4%
5.7% 4.7%
5.7%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018 2019
Industry (30+ DPD) Axis (30+ DPD)
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RECESSION SAFE BUSINESS MODEL
Carfinco (CFN) went through the last
recession with a very manageable
~4% increase in credit losses
Prices of Canadian used cars have
remained very stable over time
During the “Great Recession” used car
prices dipped only 9%, while sales
volumes remained stable
Non-Prime Credit Segment is historically most stable in Economic Downturns
Source: Axis, Equifax Database.
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AXIS PLATFORM
1
2
3
4
STRONG MARKET PRESENCE
HIGHLY LEVERAGBLE GROWTH PLATFORM
SUPERIOR TECHNOLOGY INFRASTRUCTURE
BEST IN CLASS MANAGEMENT TEAM AND BOARD, PERFECTLY ALLIGNED WITH SHAREHOLDERS
Geographically diversified Coast-to-Coast
The only full spectrum non-prime lender in Canada
Size and scale provide operating leverage to grow organically and serve as a portfolio acquisition platform
Lowest cost of capital in the D-credit market
Fully integrated Loan Origination & Management System
Westlake partnership provides access to leading edge adjudication and dealer servicing platform
Strong management team with decades of experience in the non-prime automotive finance sector
Significant shareholder alignment (insiders own 30%)
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Credit Rehabilitation & Public Perception100% of Axis loans report to the credit bureau
• Axis is an effective stepping stone to credit recovery
>71%(1)
of Axis customers improve their credit rating through an Axis loan
• Automobile installment loans act as a highly effective method to improve one’s credit rating
Industry leading brand reception across numerous metrics
A+ 4.3 / 5.0(Top Ranked vs Peers)
4.3 / 5.0
10Source: Axis, Equifax Database
(1) Pays (or paid) within 30 days of due date or not over one payment past due
BOARD OF DIRECTORS
Paul Stoyan
Chairman
• Chairman of Gardiner Roberts LLP, a Canadian business law firm
• Director at ECN Capital and Enghouse Systems; former Director at Open Text Corporation
Todd Hudson
Director• CEO of Axis
Ilja Troitschanski
Director• Founder and President of Axis
Bruce Smith
Director
• Former President and Chief Operating Officer of Element Financial Corporation (TSX: EFN) and former
Managing Director and Senior Vice President of Vendor Finance at CIT Financial
Gerry Thom
Director
• 35 years of experience in operations and management in the public and private sectors
• Recently retired as President of the Public Services Commission
Jordan Zinberg
Director
• Founder and CEO of Bedford Park Capital
• Former MD and PM at Donville Kent – an award winning $300 MM hedge fund
Wes Neichenbauer
Director
• VP and CFO at Rowntree Enterprises
• Decades of experience in automotive retail and financing with Applewood and Trend Financial
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CAPITAL STRUCTURE
39%Retail Holdings
30%Axis Insider
Holdings
31%Institutional
Holdings
Equity OwnershipCapitalization
Source: All dollar amounts in C$MM, all share amounts in millions
June 30, 2020
Capitalization Equity Ownership
Share Price (as of Jun. 30, 2020) $0.30
Axis Insider Holdings 28.7
Institutional Holdings 30.0
Retail Holdings 37.8
Basic Shares Outstanding 96.5
Market Cap $29
Metrics
Axis P/B 0.7x
Carfinco (CFN) 10 Year Avg. P/B 4.1x
Carfinco (CFN) 10 Year Avg. P/E 11.4x
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CREATING SHAREHOLDER VALUE IN SUB-PRIME AUTO
Acquired in 2006 by
Acquired in 2007 by
Acquired in 2015 by
Acquired in 2015 by
(Travelers Leasing
Corporation)
P / B: 4.0x
P / B: 4.1x
P / B: 4.2x
Terms not disclosed
CASE STUDY ON CARFINCO SHAREHOLDER RETURN SHOWN IN APPENDIX
Source: Company materials, equity research13
-
2,500
5,000
7,500
10,000
Ontario Quebec Eastern Western
Impact of COVID-19 on Axis’ Business
Source: COX Automotive
• Mandated dealership shutdown resulted in a slow down of originations
• Application volumes almost back to pre-COVID levels by the end of June 2020
• 12.5% of portfolio accounts granted ‘COVID-19 deferral’ – majority have reverted to regular paymentschedules by the end of June 2020
• $6.25M Government BCAP loan eliminates the need for growth capital
• Management steps to lower SG&A combined with the wage subsidy helped weather the storm
Weekly Volumes (Prime + Non-Prime Auto)
Nearly reverted to
pre-COVID-19 levels
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AXIS AUTO FINANCEIlja TroitschanskiFounder & PresidentPhone: (416) 633-5626Email: [email protected]
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